As employer-sponsored defined benefit retirement plans become less commonly offered by employers, defined contribution plans, such as 401(k) and 403(b) plans that rely on employee contributions and employee investment choices are increasingly taking their place. With Social Security becoming a less certain source of retirement income, these defined contribution plans and other savings plans managed by the employee are becoming more important to the employee's eventual standard-of-living during retirement years.
Plan sponsors (employers) and plan providers (administrators) typically want to encourage increased savings. Towards this end, many employers offer to match a portion of an employee's savings, with certain limitations.
Individual savings are more important now than ever, but the many investment choices available to employees may be confusing to them. Many employees select a retirement savings contribution plan, possibly even one that does not take full advantage of employer matching funds, and continue with it, unchanged, for the duration of their employment. Many feel they need their full take-home salary right now and may not want to forego even the portion of their raises that goes beyond what's needed to maintain their current standard-of-living.
Financial planners, who are often best equipped to explain to employees the consequences of various contribution plan choices, are frequently paid based on client portfolio size. Since an average employee savings portfolio is relatively small (e.g., $15K), it is often not cost-effective for financial planners to provide individualized services to clients desiring advice regarding their retirement savings contributions.